Sometimes when you spend so much of your time living your life and conducting your business online it’s hard to associate the virtual world with the real world, and you can get to thinking that the necessities of everyday life don’t apply. Becoming self-employed is great, but whether you’re giving up your day job to take on affiliate marketing full time or just using some affiliate income to subsidise your summer holiday there are some ‘boring’ considerations that you’ll have to take into account. We say ‘boring’ because they’re not instantly inspiring but they are all thoroughly worthwhile and in many cases necessary to ensure that your affiliate business is above board. If the recent credit crunch has taught us anything it’s that planning for the future and following financial guidance will keep your head above the water no mater what the economic climate elsewhere.

Tax and National Insurance
We don’t need to go into the importance of taxation for the continued growth of our country’s economy and the basic operation of our society. Whatever your feelings as to the Government’s use of your hard earned cash, taxation is an inevitability and affiliates are not exempt. You’ll need to pay tax and make national insurance contributions on your affiliate earnings. This is where things get a bit complex, but don’t worry, there’s plenty of help at hand as we’ll discuss later. Most affiliates can, if they wish, class themselves as self-employed, and as such will be required to complete an annual tax return. If your earnings are less than £64,000 a year (at the time of writing) then you’re likely to be eligible for the ’short’ tax return form, which implies that you’ve got fairly simple income and assets. Any more than that and you’ll be presented with a far more complex form.

VAT
If your business buys in goods or services, becoming VAT registered will allow you to reclaim the VAT element (15% in the UK at the time of writing) of any costs from VAT registered suppliers and other goods you may have purchased for legitimate business reasons. If your sales exceed a certain level (£67,000 annually at the time of writing) you will be required to become VAT registered whether or not you want to! You will, in turn, be required to charge VAT on all sales. Managing VAT is a fair amount of work: you are required to provider quarterly VAT returns, thus keeping your sales and purchasing accounts fully up to date and to make any payments (the difference between the VAT on your sales and the allowable VAT reclaimed on purchases) to Her Majesty’s Revenue and Customs (HMRC). As we will see below, an accountant can be invaluable in this process.

Accountancy
Keeping track of your money can be tough and to take the burden of complex tax issues from your shoulders you may want to consider getting an accountant onboard. A decent accountant can sometimes save you far more than the associated fees in legitimate tax mitigation, depending upon your circumstances. In addition, as we have seen elsewhere here at Lammo.net, you may decide to incorporate as a limited company or limited liability partnership (LLP) in which case an accountant is mandatory in creating your annual accounts. Similarly, those registering for VAT will be wise to use an accountant. Small businesses and self-employed people have used financial expertise for years, and there are large numbers of people out there who specialise in affiliate financial matters. Quality varies widely and you should look for personal recommendations from those you trust. Accountancy firms operate on both local and national levels and prices vary depending on exactly what you need doing, but some will offer consultations and meetings without requiring commitment. In terms of easing the pressure from the offset there’s nothing more effective than getting a financial professional to show you the ropes. There are also numerous software programs which are designed to streamline the process of sorting your affiliate finances to make things easier when it comes to taxation time, the use of which may also help in reducing your accountancy fees. Your account should be able to advise in this area, with each accounting firm having their own favourites.

Pensions
As a generally fairly young industry, affiliates tend to regard old age as something to worry about in the next millennium. However, as the years pass and you approach retirement age you’ll want to make sure that your affiliate career has catered to the care and income you’ll need. Many affiliates may believe that their marketing wizardry will allow them to retire early to a Chateau in the south of France and for some this holds true. However, the old adage of “aim for the best, plan for the worst” comes into play here and the wiser among you will want to sort out a pension. As with most financial products, there are so many variables at play here that we couldn’t possible advise (plus we are not regulated by the FSA which prevents us from offering financial advice!). Certainly some of the things to consider are likely to include the age at which you want to retire and the value of pension with which you want to supplement the ever more meagre state pension towards which your NI contributions go. A decent independent financial advisor (IFA) should be able to assist in this area but, again, do ensure that you get trusted recommendations and double check as far as you can before making any commitments. Chat to your accountant, bank and of course check online for examples of the types of pensions out there. In general terms, the sooner you start paying in the more money you’ll get out as an income when you retire. It’s all relative.

Insurance
If you have made the leap to full time affiliateship, you may well have said goodbye to a company health scheme and perhaps even life insurance. None of us want to think about the worst case scenarios but coverage for you and your family is vital. Again, a decent IFA should be able to help with life cover and there are a number of reputable and competitive private health care schemes which may be more affordable than you think. For those of you who will be doing business outside of your home office, it would be wise to consider public liability insurance (this is mandatory for incorporated businesses such as limited companies and partnerships) and if you are employing anyone (as an employee, not on a freelance basis) you will need employers liability insurance.

All this bureaucracy can seem time consuming to sort out in the short term and may feel like overkill, especially if you’re just setting up your first affiliate business. However, the risk is that if you don’t get round to it now you might not sort it out until it’s too late. If you’re skipping tax or VAT payments you could get in serious trouble, and not thinking about a pension will leave you out of pocket when you hit retirement age, no matter how far away that may feel now. The best thing to do is to seek professional advice. The government is more than happy to explain the inner workings of its systems and you will find HMRC surprisingly helpful on taxation and VAT issues. The various HMRC sites are a rich source of guidance and information and also allow you to file many of the necessary returns online, as does Companies House for those of you that are incorporating.

Outsourcing some or all of the financial elements of your business to trustworthy professionals is also a stress-reliever and something many affiliates and small business owners do. Procrastination never got anyone anywhere!

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